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Q: What happens after I submit my loan
application?
A: You will receive an interview within one business day
to confirm and verify your application. The interview is
also intended to select the most suitable loan program,
and ensure a favorable outcome to your application. If your
loan is approved,usually within 3 days, you will be notified in writing about
the terms of your loan approval and what documentation you
must furnish. Our loan approval will include a comprehensive list of items you
may expect to provide.
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Q: How long will it take to get approved?
A: Traditional lenders take between 6-8 weeks to approve
a loan because they require all supporting documents up
front. We have reversed this process and can get you approved
in less than 3 business days. You will be asked to submit
supporting documents after the approval.
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Q: What documentation will I be required
to provide?
A: The actual documents you will need to provide will vary
based on your situation. For a comprehensive list, click
here.
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Q: Can I get a loan without a down payment?
A: In some instances loans are available today with no down
payment. These loans require that you have a good credit and employment history. First time home buyers may also benefit from such favorable terms. For more information, please contact
one of our mortgage counselors.
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Q: What is PMI?
A: PMI is private mortgage insurance, not to be confused
with mortgage cancellation insurance or life insurance.
PMI is typically required on loans where the down payment
is less than 20%. This type of insurance protects the lender
from financial loss in the event of a foreclosure.
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Q: What are No Income Verification Loans?
A: No Income Verification loans are for those borrowers with non-traditional sources of income and/or those who cannot properly document their income earnins. this may include self-employment income, non-taxable income, etc... To qualify borrowers usually need substantial savings for a down
payment (on purchase loans) or a high equity position on
refinance loans.
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Q: At what point can I lock my interest
rate?
A: Normally, you must have satisfied the terms of your approval
letter before you can lock your loan. Once you decide to
lock your loan, your lock cannot change, whether or not
interest rates go up or down. We do however, extend special lock privileges to our V.I.P. clients (depending on the circumstances).
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Q: What is the difference between a
fixed rate and adjustable rate loan?
A: Fixed rate loans have a set interest rate and payments
that do not change over the lifetime of the loan. Adjustable
rate loans are linked to an index and fluctuate as the index
rate changes. Since there is more risk involved with adjustable
loans, lenders often reward borrowers with initial discounted
interest rates that are lower than fixed rate loans. Adjustable
loans are normally recommended for borrowers who do not plan on keeping
the loan for the full term, or for borrowers who want to benefit from lower payments during the initial term of the loan.
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Q: When does the property need to be
appraised?
A: As soon as possible. If you are applying for a purchase
loan, we will order your appraisal and charge it to your credit card.
If you are refinancing, you may need to have your appraisal
completed and prepaid before your apply for your loan. We do however extend special privileges to our V.I.P. clients, which includes other payment options.
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Q: What is APR?
A: APR stands for Annual Percentage Rate and is another way of recalculating the
interest rate of a loan. This rate is the true cost of a
mortgage loan and is usually higher that the note rate on
a loan because it factors in closing costs associated with
a loan. APRs are calculated based on a loan amount that
is net after lender related closing costs(finance charges), rather than the
gross loan amount that is borrowed.
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Q: What are closing costs?
A: Closing costs are all the expenses incidental to the
sale of real estate such as loan fees, title fees, appraisal
fees, etc. For a comprehensive itemization of closing costs that may be associated with your loan, click here.
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Q: What is a loan escrow (also refered to as a loan impound?
A: When a loan is "escrowed" (or "impounded")
, the borrower pays their property taxes and insurance along
with their monthly mortgage payments. These monies are placed
into an account held by the lender who in turn pays the
taxes and insurance on behalf of the borrower when they
are due. This should not be confused with an "escrow" company.
An escrow company is the neutral third party that is hired to handle the details of your settlement at closing. In some areas, the escrow company or settlement agent is an attorney.
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Q: What is title insurance?
A: Title insurance is an insurance policy issued by a title
insurance company which insures a home owner against title and ownership-related to errors, omissions or claims.
The premiums are determined primarily by the value
of the property or loan amount.
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Q: Should I refinance?
A: There are many variables to consider before taking the
refinance plunge. Do you want a fixed rate? Do you need
cash out? Did you accumulate any negative amortization?
For a better picture, check out our calculators.
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Q: What is negative amortization?
A: Negative amortization or deferred interest, or reverse
accrual is when your mortgage payment is not sufficient
to cover the interest rate you are being charged. The unpaid
interest will be added to your principal balance and will
increase the amount you borrowed.
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Q: What is an ARM and how does it work?
A: An ARM is an adjustable rate mortgage whereby your interest
rate changes periodically. The adjustment period may vary from 1 month
to as long as 10 years. With ARMs you normally get a very competitive initial
(teaser) rate depending on your program.
Your interest rate will change at every adjustment period. The rate is determined by adding two key figures--the
index plus the margin. The index is the fluctuating value that the lender uses to determine your interest rate changes (such as the prime rate, treasury rates, etc).
The margin is the spread (or add-on) over the index and is fixed for the life of the loan and determined
at the time of lock. Most loans will have periodic and lifetime
caps to protect you from wild fluctuations.
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Q: Why do interest rates fluctuate
daily?
A: Interest rates fluctuate based on the availabilty of mortgage funds in the financial marketplace. Mortgage(s)
fall into two general categories: Investment Grade and Portfolio
Grade. Investment Grade mortgage loans are sold in a secondary market that has a consistent appetite for such loans. This means that loans made to the homeowner are
sold to another financial entity after the lender makes the loan to
the homeowner. The secondary market determines the yield
requirement on these loans based primarily on economic news
and the level of demand for such products during a given day. With
inflationary news, the market will demand higher yields.
The reverse is true with deflationary news. Portfolio Grade
loans lag the market and are usually not as competitive.
Portfolio loans are designed for borrowers with qualifying
problems, and as a result are not in high demand in the
financial market place. Portfolio loans are higher in interest
rates because of these reasons.
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Q: What is a buydown?
A: A buydown is when you pay a premium up front in order
to establish a lower initial rate and/or payment so you
may qualify for a given loan. In certain situations such
as new construction, home builders will subsidize the mortgage
to make it attractive to the home buyer. They are essentially
"buying down" the loan by paying a premium up front, which is normaly built into the cost of the home
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Q: What are no point, no fee loans?
A: So called, no point, no fee loans will have hidden costs.
These costs may be in the form of higher interest rates,
pre-payment penalties, larger margins, etc.
Whether or not these loans are for you depends on your particular
situation. Generally, for homeowners who anticipate a short
stay in their property, a no cost loan without pre payment
penalty may be the right choice. However, the homeowner
who does not anticipate a move for a long time is better
served with a loan with points, and a lower interest rate.
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Q: What is a home equity loan?
A: Home equity loans are loans with which use the equity
in your home to get cash and they fall into two different
categories: lines of credit and straight loans. A line of
credit acts like a credit card where you pay interest only
on the amount of credit that is outstanding. As long as
you make the minimum monthly payment, you can borrow up
to your limit at any time, or pay down the balance at any
time.
A straight loan is a fixed amount you borrow upon closing
and pay back over a pre-determined time period. Home equity
loans are typically available from $20,000 to $200,000.
Your credit limit or the amount you are qualified to borrow
is determined by taking a percentage of your home's appraised
value and subtracting any outstanding mortgages on the property.
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Q: What are qualifying ratios?
Qualifying Ratios are the ratios lenders use to determine
how your debts measure up to your income. There are
two ratios used in qualifying a borrower: the housing (or top) ratio and the total debt (or bottom) ratio. The top ratio
is determined by dividing your housing costs (principal+interest+propertytax+hazard
insurance+mortgage insurance+homeowners dues), as applicable, by
your income. The bottom ratio is similar to the formula
above, however your minimum monthly consumer debt obligations (credit
cards, auto loans etc.) are added to your housing expense then divided by your income.
Generally lenders look for ratios of 28 on top and 36 on
the bottom to qualify a borrower. Deviations from these
figures are always made depending on a number of factors.
These factors could be: credit, equity in the property,
cash reserves, stable employment, etc.
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Q: Who are FNMA & FHLMC?
A: FNMA & FHLMC, also known as Fannie Mae and Freddie
Mac respectively are quasi government institutions created
by Congress to purchase conventional home loans from financial
institutions and mortgage bankers. FNMA and FHLMC are the
primary buyers of mortgages in the secondary market and
they securitize said loans to sell major investors such as pension funds, insurance companies, etc. This creates much
needed funds for future home owners by recycling funds back
to the lending institutions.
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Q: What is the difference between a conforming and a jumbo loan?
A: Conforming loan amounts are loans that are readily saleable to
FNMA (Fannie Mae) and FHLMC (Freddie Mac). The limits on conforming loans
are adjusted once a year by these entities. Currently, for a single family
dwelling, the maximum limit is $417,000. These limits vary for multiple
units . The limits for multiple units in the continental United
States (excluding Alaska and Hawaii) are:
2 Units: $533,850
3 Units: $645,300
4 Units: $801,950
Limits for properties in Alaska and Hawaii are higher. Any amount over
these limits is considered to be a jumbo loan.
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Q: What are intermediate term ARMs, such as 5/1 and 7/1 ARMs?
A: Intermediate term Arms are loans that have an initial fixed rate
period. The fixed year term can be 3, 5 , 7 or 10 years. After the fixed
term has expired, the loans typically convert to a one year adjustable
program. These loans are ideal for individuals that can initially
determine how long they intend to keep their property and want the security
of a fixed payment period.
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Q: What is secondary financing?
A: Secondary financing is when a borrower gets more than one loan to
acquire property. Typically there will be a first mortgage followed by
said financing, a second mortgage. Home equity loans, home equity lines of
credit, seller seconds are types of secondary financing. One way secondary
financing is an advantage is when borrowers want to avoid mortgage
insurance. A common financing scenario is an 80/10/10. This is a
situation where the borrower puts 10 % down, borrows a first mortgage of
80% of value and a second mortgage for 10% of value. This scenario avoids
the need for mortgage insurance with only a 10% down payment.
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